Volume Four 2013 focusing on Electricity

Good audit result

“I am pleased that the audits of six State owned electricity corporations resulted in unqualified audit opinions,” Acting Auditor-General Mr Whitfield said. “The audit of Eraring Energy is yet to be finalised.”

“The electricity corporations’ produced timely and accurate annual financial statements,” he added.

After tax profits rose to $1.7 billion, up from $1.2 billion in 2011-12 and contributions to government rose to $1.8 billion, up from $1.4 billion in 2011-12. This was mainly due to the combined after tax profit of NSW distributors increasing from $771 million to $1,363 million from the previous year. Increases in network revenue, prudent capital expenditure management and ongoing efficiency savings in operating expenditure led to the increased distributor profits.

Distribution to government

Electricity entities’ accrued and paid distributions to the government:

• $572 million ($573 million in 2011-12) in taxation

• $1,178 million ($866 million in 2011-12) in dividends.

Lower than expected capital expenditure for distributors and Transgrid over the past four years

“Capital expenditure by the three NSW distributors and Transgrid during 2009-14 is expected to total $15.2 billion, $3.1 billion lower than the Australia Energy Regulator approved investment in capital expenditure,” Acting Auditor-General Mr Whitfield said.

“I understand this is due to entities deferring some planned infrastructure upgrades as a result of reduced energy demand over the past few years.”

Higher electricity prices over the past few years has led to a decrease in residential and commercial peak demand, consumption and energy growth rates for 2013 in New South Wales. Increased Photo Voltaic generation and reduced manufacturing consumption further reduced demand for electricity.

Substantially lower increases in electricity retail prices

“The average annual household electricity bill is expected to increase to $2,073 in 2013-14, an increase of 1.7 per cent over the previous year,” Acting Auditor-General Mr Whitfield said. “This is a much smaller increase than the 17.4 per cent average annual increase over the past six years.”

The 1 July 2013 increase is mainly due to higher retail costs offset by lower generation costs.

The two major components of a typical residential bill continue to be network charges (50 per cent) and generation charges (22 per cent).

IPART expects regulated electricity prices to increase by 1.8 per cent in 2014-15 and fall by approximately 6.9 per cent in 2015-16.

The fall in regulated electricity prices in 2015-16 reflects the carbon price as it moves from a fixed price to a market price linked to the international carbon markets. Any other system or the abolition of carbon pricing will result in different prices.

Contact Barry Underwood (02) 9275 7220; 0403 073 664 or email barry.underwood@audit.nsw.gov.au.